Cannabis Prices Have Plummeted in Northern California. Here’s Why.
The cannabis market in Northern California is experiencing a significant decline in prices, with the cost per pound dropping from over $4,000 to a mere $300-$500, according to industry experts. Some growers have even reported selling their crops for less than $200 per pound due to fears of an oversupply.
Rachel Greene, a seasoned grower, attributes this rapid downturn to the passage of Proposition 64 in 2016, which legalized recreational marijuana sales and incited a wave of new entrants into the market. This increased competition, alongside the traditional corporate strategy of operating at a loss to outperform rivals, has resulted in a steep price decline.
Coupled with inflation, the cost of running a cannabis business has soared in the past two years, while an oversaturated market in California has limited growers’ options. As a result, many pounds of cannabis have been composted, and the economic repercussions have been felt throughout the region.
The fallout extends beyond growers as the price decline has resulted in lost tax revenues. The city of Ukiah, for example, is bracing for an estimated $1 million drop in tax revenues partly due to the faltering cannabis industry. The impact is reflected in city records showing a nearly 10% drop in shopping activity during the last three months of last year compared to 2021.
Ukiah’s garden supply sales fell by approximately 13% last year, and overall sales tax collected dropped nearly 6% in 2022 compared to 2021. Despite this, city officials remain optimistic about the city’s resilience, promising to continue major infrastructure projects and recreational programming.
Other Northern California towns, once booming from the logging industry, are now facing a similar economic downturn. These counties, known as the Emerald Triangle for their renowned cannabis production, experienced a significant growth in population and economic activity following the legalization of medicinal cannabis in 1996.
However, the population growth figures don’t account for the influx of people who moved to the region to establish cannabis operations without registering as California residents. This trend, along with a seasonal surge in workers seeking employment as trimmers and laborers, has resulted in a considerable yet unrecorded population increase.
In the face of this economic downturn, the cannabis industry and its surrounding communities are grappling with the challenges of a saturated market, rising costs, and dwindling profits. Let’s hope the newly legal market takes a turn and saves some local businesses.
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